The purpose of the paper is to discuss and analyze the setting up and the management of a successful training and education franchise operations in China. Both the factors affecting the success of the training and education franchise model in China as well as the challenges will be discussed and analyzed as well. The paper will also compare the Informatics training center model with other successful model in other industry such as McDonald’s and KFC, which represent franchises that have adapted best to the China market. The objective of the paper is to eventually provide a paper that will serve as a guide to those in the training and education industry who are contemplating to enter the China market through the franchising approach.

Summary

According to information, China has become the second-largest franchising market in the world and the most promising destination for those overseas franchise systems aiming at the far eastern region. Moreover, it has been more than ten years of franchising in China and there have been more than 1,900 franchises successfully developed locally along with the entry of China to the World Trade Organization there are more foreign franchisors like for example McDonald’s and KFC will be allowed to do franchising in the marketplace of China with less restrictions in the future years of franchising business in China. Thus, KFC may be a commercially revered icon in China, but McDonald's has upped the ante in the intensifying competition by recently hiring Chinese basketball star Yao Ming as their official spokesperson in order to improve brand recall and steal a march on its competitors also signed a contract to sponsor the 2008 Summer Olympics in Beijing. ''Several companies with a high profile franchising operations internationally have entered the Chinese market with a standard foreign-investment model. This involves a limited-liability joint venture with a strong domestic company, followed by the opening of branches in many locations,'' says Fraser Mendel, known IPR expert and Beijing-based senior associate, corporate department, Morrison & Foerster. Franchising is ‘’a type of business, in which, by contract, the franchiser licenses the franchisee to use the trademark, trade name, business format and other business resources which the franchiser has a right to license; and the franchisee carries on business under the uniform business operation system in accordance with the agreement and pays franchise fees to the franchiser’’ (Regulation for Administration on Commercial) as a booming sector in the Chinese economy. The franchising model, which allows people with limited capital to enter an established business, is well suited to a developing economy. China’s franchising industry is set to enter a rapid but orderly development as franchising has emerged in China as the most notable was KFC’s first Chinese outlet in Beijing as the franchising industry has experienced a period of chaotic development. Today, there are about 200 franchise brands in China ranging from supermarkets and drug stores to fitness centers. Nearly 60 industries have applied for franchise operations, including the traditional sectors of catering, retailing and individual services, as well as newly developed fields of education, commercial services, family services and automotive care. In terms of the number of franchisers, the catering industry leads by 35 percent while retailing accounts for 30 percent and auto sales 3 percent. Though China has the most franchise systems in the world, the scale of franchise operations is still relatively small. China’s promising economic environment is leading to more companies adopting the franchising model. Increasing numbers of enterprises became qualified to market their franchise after improving brands, technology and management.

McDonald’s:

As the most successful franchiser in the world, 70 percent of McDonald’s outlets were opened all over the world through franchising. However, in China McDonald’s is operating through a joint venture. McDonald’s set up a joint venture with a local company in Beijing when it entered the Chinese capital during 1992. McDonald’s has about 600 outlets in China but not operating through direct franchising. In recent years McDonald’s started to adjust its strategy on franchising in China. In 2004, McDonald’s (China) opened its first franchise outlet in Tianjin and announced that batches of franchise restaurants are to be launched sooner. Thus, McDonald’s is planning to further expand its franchise business in the second-tier cities and in the countryside.

KFC:

KFC opened its first outlet in China in 1987 and now has over 1000 outlets in 200 cities all around China. At the beginning most KFC outlets were entirely owned by Yum Brands which is a registered company in Shanghai and established dozens of subsidiary companies in various large cities. Following this model, Yum Brands, formerly known as Yum Brands, has full rights to control the overall operations of the business. In 1993 KFC opened its first franchise outlet in Xi’an.

Project Outline

Informatics core business activities are in training and education services. Franchising is one of the company’s main strategies to enter and expand into foreign and unfamiliar territories. While the company has been relatively successful in its franchising activities elsewhere in the world, the territory of China offer much challenges as well as tremendous market potential. This paper will focus on Informatics China franchise model and experiences, from its initial entry into China and its use of the franchising strategy to grow the operations all over China. The paper will assess the pros and cons of franchising in China, and offers proven best practices for building a successful franchise system while covering strategic issues and challenges faced by Informatics as a foreign franchisor in China. The outline of the paper will include the designing of the franchise system, recruiting, selecting, managing and supporting of franchisees, establishing territories and pricing and managing the expansion. Drawing on studies of some successful franchise like Mc Donald and KFC , proven principles and techniques for the entire franchise system development process: defining products and services, planning support, establishing royalty rates and advertising programs, mapping territories, recruiting and managing franchisees will also be identified and discuss.

Evaluation of the training and education industry in China: Informatics competitive position and competencies

Education and Training that involves investment in the education industry will become very popular in the future. China’s fast growing economy creates a sound and budding environment for foreign language training. English First is a franchise education organization operating successfully in China. With the growing demands for foreign language training, teamwork training and business training, there will be great market potential for education and training. Training and Education Industry in China can be evaluated through the successful Informatics that they have adapted throughout the recent times most in dealing to franchises that will give a clear emphasis of the matter along with important information needed for the integration and realization of training and education of the country. As Informatics is considered as a global leader in quality lifelong learning services, today announced that its Informatics has been appointed as accredited training and testing center for the International Council of E-Commerce Consultants (EC-Council), a leading provider of e-Business certification programs in lieu of a prestige partnership, Informatics has begun offering the only authorized programs in the world leading to an Ethical Hacker Certification and Hacker Forensic Investigation Certification for IT professionals.

Informatics, which provides leading IT training and certification for computer professionals across fifty two countries through the network of training centers around the world and has already begun offering training and authorized testing mapped to EC-Council’s CEH exams in China through the better competitive position and competencies that enhances growth and value of Informatics franchises in China.

The advantage to the franchisee

The franchisee is the proprietor of its own business and owns the tangible assets of the franchise outlet. What makes the franchise different from any other business is that it gains from the franchisor the entire business concept with full training, assistance in every aspect of setting up and running the business, and access to necessary materials and supplies. In addition, it must make regular payments to the franchisor in the form of management services which is an agreed mark-up on supplies obtained from the franchisor.

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